The Business extended PMA Cycle Index (extended PMABCI) – June 2018
Decline in the West Bank and Gaza Strip
The PMA has released the results of its extended Business Cycle Index (extended PMABCI) for June 2018. The new index surveys, beside the industrial sector, six additional sectors, namely: agriculture, trade, construction, transport and storage, IT and renewable energy. The overall index fell notably during June due to the significant drop in the indices of both the West Bank and Gazan Strip. As such, the overall extended PMABCI slipped from 5.2 points in last May to -0.4 points this month, however, it remained higher than the index of June 2017 (-6.2 points)
In the WB, the index fell to 12.1 points this month compared to 17.3 points in May, owing to remarkable decline in the trade index (from 5.6 to 1.3 points). However, the remaining sectors’ indices have insignificantly changed. The indices of industry, communication and IT, and transportation have all increased slightly and the indices of agriculture, renewable energy and construction have marginally slide.
Overall, the decline in the West Bank's index reflected lower production and sales during June, along with worse future expectations about production and employment, as indicated by the economic firms' owners.
Similarly, the index in GS notably deteriorated from -25.3 points to -30.3 points between May and June 2018, against the backdrop of the notable decrease in the industry index (from -4.1 to -6.7 points), the trade index (from -17.8 to -19.1 points) and the agriculture index (from -1.0 to -2.5 points). Conversely, only construction index managed to pick up slightly (from -1.6 to -1.3 points). All other sectors’ indices (renewable energy, storage and transport, and communication and IT) have stabilized at the previous levels.
It is worth noting that the Gazan index register mostly negative values, which reflects the adverse long-lasting political and economic conditions in the Strip, the continued Israeli siege, and the prolonged delays in reconstruction efforts. Moreover, production and sales levels fell during this month, which resulted in accumulated inventory as indicated by Gazan firms' owners. They also showed pessimistic future expectations about production and employment in the coming three months.
It is noteworthy that the PMA has extended its business cycle index to increase its scope and coverage of the economy. The new index’s sectors form collectively around 60% of GDP (at factor cost) in Palestine, compared to only 15% under the previous industry-based index. The extended index still excludes the services and the financial and insurance activities, whose inclusion remains a challenge due to various measurement difficulties. In sum, the extended PMABCI is a monthly index, which aims at capturing the state and evolution of economic activity in Palestine by tracking sectoral performance (especially fluctuations in production and employment levels). The maximum value of the index is positive 100 points, while the minimum is minus 100 points; a positive value indicates favorable economic performance, while a negative value indicates bad performance. On the other hand, a value close to zero indicates that economic performance did not change and is unlikely to do so in the near future.